tv On the Money With Maria Bartiromo ABC February 10, 2013 7:00am-7:30am EST
welcome to "on the money." i'm maria bartiromo. my conversation with outspoken economist paul krugman is ahead. why this nobel pobrize winner ss the deficit doesn't matter now and why the government needs to spend even more money. he ran two of the nation's largest and most important companies and turned around general motors. i'll talk lessons learned, the state of american business and the future with ed whitacre. and bling, if you've got the ca, they've got the jewels. the perfect valentine's day gift if you have deep pockets. jewels, anyone? "on the money" begins right now. >> this is america's number one financial nenews program, "on t
y.ney." now, maria barromo. >> here's what's making news as we head into a new week "on the money." it is the u.s. government versus standard & poor's. the most aggressive move yet by the justice department to hold accountable a financial company at the center of the financial melt down of 2008. the $5 billion civil suit charges s&p intended to defraud investors, aaa ratings they did not deserve. standard & poor's' attorney says not so farst fast. >> rhe ratings that were issued were believed by the people who issued them and that's what the government has got to disprove, that -- the government's got to show in this case not that a lot of people lost money because of their investments. the government has to show that standard & poor's literally disbelieved the tradings. >> meanwhile, choppy weweek for the markets. dow with its worse day of the year on monday falling triple digits and then getting most of that back on tuesday.
the markets rebounded later in the week. so what's next? >> i still think we're going to have a correction. the markets started the year with the investors pretty complacent. now they're almost euphoric. everybody you have on the program thinkss the market is going higher. the market, when it has a good january, usually has a great year. there's a general feeling of comfort and we've got a lot of hurdles that we've got to get over. and dell is hoping a new deal to go private will compute. the company will announce the largest buyout with a price tag of $24 billion. the deal is being led by the company's founder and thane investment firm silver lake. and if you're waiting for that check to arrive in the mail on saturday, you might have to waitit a long time. the u.s. postal service announcing it will eliminate saturday mail delivery beginning in august because of the r ink to the tune of $16 billion last year at the post office. congress still has to approve the measure, which would save $2 billion a year.
the forceis with "star wars" fans everywhere. disney which now owns the franchise says there are more movies on the way. ceo bob iger told me to expect the first new film in 2015. >> in fact, we are working on a few stand alone films. they are working on films derived from great "star wars" characters that are not part of the overall saga, so we still plan to make "st wars" 7, 8, and 9. and here's the nobel prize winning economist, "new york times" columnist and best-selling author. paul krugman's book "end in depression now" is now out in paperback. he's joining us now to talk more about it. thank you for joining us. let's start with the debt and deficit since this is front and center as far as the international conversation as it may be. the cbo, congressional budget office, came out with new projections this week. they saw, long term, the economy will move in the opposite direction of the deficit. theconomy grows if the deficit
goes down, it shrinks if the deficit goes up. you gue in the book at the deficit really doesn't matter right now. do you disagree with the government's projections? >> no, i think the cbo report is pretty reasonable. and it says that we wish we had lower debt, and if we look at the long term it would be ce to pay down the debt but it does not show a crisis. and trying to slash the deficit right now will deepen the clear and present danger which is a very high unemployment and ongoing economic slump. so i actually -- i found the cbo report supportive of what i'm saying, that right now our priorities should be jobs and not the deficit. >> i want to get your reaction to something that dave camp told us, the chairman of the house ways and means committee. he said that we need an equitable approach to cutting and spending. take a listen. i want to be get your reaction to it. >> sure. >> what we really need now is the second piece of the balanced approach which the president called for in december which is beginning the reining in of the debt and deficits. on the president's xigs they
said when the debt gets to this level of the economy it, again, kos us millions of jobs. >> yeah. so there is not a hint of evidence that the deficit or the debt is a problem for the u.s. economy right now. now, clearly other things being the same, you want to pay down your debt. but you don't want to do it at a ti when it will lead to sharply higher unemployment, which is what would happen right now. so this is a myth. whereas we have overwhelming evidence that slashing government spending when the economy is depressed significantly deepens that depression. so this is -- this is a convenient myth. >> but we've seen what happens in europe. we saw the debt strangle countries in europe. you're saying in the book we need even more government spending right now, to stimulate the economy. >> yes. >> how much would you like to see that spending be? where does it stop? when do you expect all this debt and deficit to start choking us? >> european story is not at all, the european story, this is amazing. people have somehow managed to
forget very, very recent history. spain, ireland had very low levels of debt when they came into the crisis. now they have deficits. now they have debt but it's because of the crisis, not the other way around. greece is a completely different story. of course, we're nothing like any of those because we have our own currency. freedom of action. how much mail? i i would actually in the book call for about 2% dprks dp, $300 billion a year, which is easy now. it would take the state and local governments to rehire the schoolteachers laid off and restart the pothole fillings that have been canceled because of budget constraints. that's enough to get us a long way. that's enough to get us close to full employmentoy right now. you stop at when the private sector repaired their balance sheets enough so the economy is growing strongly again and when the feds start raising interest rates, that's the time when you can safely cut government spending because then you can make a deal. the fed will not raise interest
rates if the government is cutting spending. so there is no net effect on jobs. so it's about when we get off that zero lower bound to use the jargon on the interest state. >> the president asked congress to pass a set of limited spending cuts, limited spending cuts ahead of the sequestration. i want to ask you about the sequestration. the mandatory spending cuts congress imposed on themselves, it takes affect march 1st. how does this play out? >> it's a bad thing. the correct answer is we shouldn't be doing any of this. this is all fundamentally stupid. i understand the president has to deal with political reality so he can't just say that and make it all go away. but now, it's important. the sequester is not as scary. the debt limit was as scary as anything because nobody knew what happened if the united states didn't pay its debt on time. financial crisis, nobody knew. this is ordinary. this is a awe centerity policy being imposed through bad legislate tive history. so it will hit the economy. if we go a month into it it's not a carostrophe. >> let me ask you about the
state of the union. the president giving his state of the union this upcoming week. what do you hope he will say? >> it's funny thing. i'm not all that psyched about the whole thing because i don't think he can pass legislation given congress. mostly what he needs to do is defend the achievements of he was first term. presumab he will do that. he will talk about things that will happen but most of it won't happen. >> a lot of people feel like his main goal is to get thehe housef representatives back under democratic rule. i'm just wondering why we're constantly trying to get re-eleed. let's solve the problems of the country rather than constantly trying to get re-elected. >> let's be fair about this. the fact of the matter is the two parties have radically different views of what this country should be like, right? democrats have a view of a fairly strong social safety net, fairly high tax on rich people. the republicans really want to roll the clock back to before franklin roosevelt. those are honest differences of views. >> very quickly. what kind of an economy in the u.s. are you expecting in 2013?
>> okay. if we manage to more or less saddle past the sequester i think we're in pretty good shape. i think housing is coming back. virtue of circle developing. the private sector is actually on the road to recovery unless the government screws it up. >> we will leave it there and talk to you soon about t. thank you so much. up next, we're "on the money," overcoming government motors. the man who helped rescue gm and ran at&t tells me about the state of american business today. my conversation with ed whitacre is next. later, a gold star for one of a kind in the jewelry industry. >> 23 different stones, 15 different cuts, all of the same material. will. as we go to the break, take a look at how the stock market ended p week. back in a moment.
provide them with assistance, but that assistance is conditioned on them making significant adjustments. >> that was president-elect obama in 2008 on the coming bailout of the american automobile industry. those significant adjustments included the bankruptcy of general motors just days after my next guest came out of retirement and landed in the drivers's seat at gm. it's ed whicre. long-time ceo of at&t. he served as chairman and ceo at gm from 2009 to 2010. a story he told in mhis memoir. what a great read. your back has terrific lessons of the trade. you say it's not magic, it's management. businesses are not democracies.
what did your role in the bailout in such a challenging time for the country teach you about managing and about management? >> well, i've always thought management was responsible for what happened. this taught me, once again, that's a true statement. >> right. so it's about adership, it's about -- >> it's about leadership. >> -- the lead. what were the biggest problems at gm that you couldn't have not known before you arrived in detroit? >> well, i thought gm had a vision but when i got there i found out they didn't. and so i thought it was very important we establish a vision, which we did early on, which was to design, build, and sell the world's best vehicle. after that, it was a matter of getting the right organization, organizing things, eliminating matrix management, empowering the people, and miracles happened. it was great. >> amazing. amaze that the stock had gone from, what, 60 to $3 in a few short years. >> right. >> but interesting comment. you know, you felt they had a vision and you realized they didn't. how can you continue operating in business without a vision? and nobody understand -- no one knew it? >> i don't know. i asked a lot of people when i first got there what do we do, what did we do wrong? i got the answer, we did nothing
wrong. the economy got us. well, that bs the queststion, why didn't it get all the other automobile or vehicle companies? but there was no vision. i asked people what we do here, and i didn't get very satisfsaactory answers. so early on we decided what we did here, which was design, build, and sell the world's best vehicles. >> that is fantastic. so gm saw a huge re-ipo in 2011. how safe is the american automobile industry dodd when it comes to the ability to develop products and sell great products to the public? >> i think gms in great shape. i think you just look at the results and you will see it's onward and upward. there are a lot of new vehicles under development and many being introduced this year. i think they're on a great course. >> what about american business in general? from your days at at&t, you worked with steve jobs on partnering at and t with the iphone at its launch. we'll talk about that. in the book you looked at companies that pondered too long and lost out. talk to us about business in general. what you've seen over the years.
how has american business changed? >> you know, i hear a lot of talk about uncertainty these days, a lot of people are sitting with cash. there's always been uncertainty. i remember back in '90 when i ecame chairn of at&t there was a lot of uncertainty, whether it be rulatory or whatever. i think uncertainty has always been there. i think we're going to live with that. but i think now is a great time of opportunity. >> what about the idea that the regulatory environment is getting toughgher from the epa , you know, the financial regulators, dodd frank, business today faces a different regulatoryla environment than t past couple of decades, no? >> i don't think so. i remember early on acquisitions we were going to make t at at&t, it was tough. we didn't know. we spent a great deal of time in the political part of the business and the regulatory part of the business. it was touch and go. i'm not re it's changed so much. >> i see. okay. what about the global story? a lot of people say in the last several decades american
business was really riding a wave of globalization. today, you're more likely to hear about jobs in buffalo and in michigan than in bangalor, india. are economies looking inward? >> i think so. i think there are some coming back. i think that's a good observation and i think that's a good sign. >> you think it's a good sign that it's not the globalization sort of openness that we saw a few years a and now economies are looking inward? >> glad to see us bringing jobs back to this country and rethinking some of that. i think that's very helpful. >> final question. what do you drive now? driving a gm? >> driving a gtn cadillac st zrs >> driving a gtn cadillac st zrstsv. it's a hot car. >> hot wheels. ed ed whitacre. >> the book, "american turn around, reinventing and way we do business in the u.s., reinventing gm." up next, we're "on the money." when a diamonds aren't the girl's best friend, one jeweler is if you're shopping for your
of an american crown jeweler, making just a few pieces a year for some of the wealthiest of new york and hollywood, proving all that glitters is more than just gold. >> when the average american or anybody closes their eyes and says, think of jewelry, they think of big diamonds because it's about money. i mean, the biggest diamond has to do with how rich your husband is. >> or how rich you are. >> or how rich you are, yes. >> vendura, a jeweler with a reputation for style above price, housed in a manhattan salon, jewels dreamed up decades ago by sicilian duke fulco vendura. for the likes of rothchilds d royalty, are still available today thanks to father and son ward and nico landrigan. >> i bought vendura's name and i bought his designs. we have about 10,000 drawings that he did during his career. and i reckon, counting them out, he made about half. since 1985 when i bought the company, i have made maybe 500 different designs, so we still
have 9500 to go. >> we have that one piece in the museum collection as well. >> the common theme i see with vendura jewelry is it's wearable. it's jewelry you wear. you don't put it in the bank and wear it once a year to the opera. one is a bracelet for greta garbo. she didn't wear jewelry except these things. ten years ago before gold went crazy they were $5,000 now they're $20,000. >> we work with the same workshops that made jewelry for vendura in the 1940s. when we make one piece we can put time and attention to make it just right as vendura designed it in his original paintings. in a way when you make 500 of something there's no way you uld. >> how have you been in business so long, more than 70 years, and kept such a low profile? >> when vendura opened it was intentional. >> in the 1920s, vendura met his muse, , cocochanel.
>> she liked young man. >> these were made for coco chanel. he said, well, you're not wearing this stuff. why don't you try this? got out of a pencil and an envelopend and sketched it. >> coco always wore two. a lot of ur clients asked us, do i really need two if. >> just have four. >> very same question. >> should i be wearing two? >> wonder woman. >> do you have two hands? >> ward land gran began in the jewelry department at sotheby's where hehe let elizabeth taylor and sir richard burton. how did jewelry play a role in their romance? >> the auction was just a year ago. it brought over $100 million, which was the most ever. and the three pieces i sold of which two are in the sale, i sold her the diamond and i sold
her that for $305,000. >> we had a pearl that i had made a big fuss over because it had belonged to the king of spain and that polian and richard wanted to buy it for her for veil teen's day. he got it for $37,500. she hadn't had it on ten minutes when she comes running over, she said, ward, i lost the pearl. what was left was the little chain. they were in the bridal suite at caes caesar's palace which is the size of two tennis courtses. the rugs are thick pink shag. sort of pepto-bismol pink. we're all on our hands and knees looking for this thing. i saw a settee and it was under it. i said, listen, 500-year history. you had itit of 20 minutes andn your dog is eating it already. it brought $11.5 million. >> who have you learned about women in the 50 years in the jewelry business? >> well, i've heard jewelry
jokingly called the currency of love. >> that was a valentine's day piece. >> it was. that was made originally -- commissioned by tiyrone power fr his wife. he went to ventur vendura i wan something ro mabt tick. >> my heart gift wrapped. >> you've got giants around you who obviously want a piece of the action. >> i guess may call it market share. we just nibble at the market share compared to the big guys. my thanks to ward and nico landrigan. up next, the newews in the upcoming week that will have an impact on the money. and remember the base basketball cards we used to collect just for a stick of gum?
for more on our show and our guests, check out our website. hope you will follow me on twitter and on google plus. look for at maria bartiromo. first, though, a look at the stories coming up in the week ahead that may impact your money this week. earnings reports are out from cococola, whole foods, pepsico. on tuesday, president obama addresses a joint session of congress for the state of the union address. on wednesday, we get january's total retail sales rert. on wednesday, facebook's mark zuckerberg will host a fund-raiser for new jersey governor chris christie at his home in palo alto. friday, the index on activity in the manufacturing sector. and finally today it is the stuff treasure hunters dreams
are made of. a rare 148-year-old baseball card found in a yard sale in rural maine has been auctioned off for $92,000. the card shows the brooklyn atlantic baseball club and was found inside an old photo album by an antique hunter. he also bought old coke bottles and a few chairs for $100. the name of the buyer hasn't been released by bauut a a pret good profit for the time invested. invested. join m me look, every daye're using more and more energy. the world needs more energy. where's it going to come from? ♪ that's why right here, in australia, chevron is building one of the biggest natural gas projects in the world. enough power for a city the size of singapore for 50 years. what's it going to do to the planet? natural gas is the cleanest conventional fuel there is. we've got to be smart about this. it's a smart way to go.